The Czech Republic’s central bank has announced its fifth consecutive interest rate cut, bringing the borrowing costs down by half a percentage point to 4.75%. This move was expected by analysts as inflation remains low and the economy shows signs of recovery.
The bank began reducing borrowing costs in December 2022 with a quarter-point cut, followed by four more cuts of half a percentage point each in February, March, and May. Inflation has decreased from 15.1% in 2022 to 10.7% in 2023, meeting the bank’s target of 2.0% year-on-year in February and remaining steady in March before briefly rising to 2.9% in April before falling back to 2.6% in May.
Recent statistics released by the Czech Statistics Office indicate that the country’s economy grew by 0.3% compared to the previous three months and increased by a modest 0.2% year-on-year in the first quarter of 2024 after contracting by 0.2% in the last three months of 2023. Central banks globally are considering lowering borrowing costs as they evaluate their respective economies’ impact on inflation, following suit with other central banks such as the European Central Bank (ECB) and the U.S Federal Reserve (Fed).
On June 6th, ECB reduced its key interest rate to 3.75%, down from its record high of 4%. Fed officials also acknowledged progress on inflation on June 12th but anticipate only one more rate cut this year, despite their optimism on inflation’s reduction trend across their economies worldwide
